Tuesday, July 31, 2007

Arbinet-thexchange Inc.

Arbinet-thexchange Inc. is a NASDAQ listed security that has been trading in a range between $4.08 and $6.80 over the past year. With 25,740,660 shares outstanding, a recent price of $5.83 gives a total market capitalization of $146,979,170. While there are certainly larger companies, Arbinet-thexchange Inc. has definitely earned its place in the pack. Last year, Arbinet-thexchange Inc. created $-0.14 in earnings for every share outstanding.

Arbinet-thexchange Inc. is currently priced by the market at 0.00 times last year’s earnings. Many trading multiples around the world are quite attractive these days, but don’t be fooled. A Price to Earnings ratio of 0 simply means that the security didn’t make any money last year.

With a share price under $50 a share and earnings per share below $1 a share, Arbinet-thexchange Inc. is unlikely to be an interesting value proposition. Consistent earnings are the key to high valuations and this security is not on its way.